The analyst rating from JPMorgan for HSBC Holdings and Standard Chartered is based on several key factors:
1. Recent Stock Performance: Both banks have significantly outperformed the Hang Seng Index (HSI) over the past three months, with HSBC and Standard Chartered advancing by 29% and 26%, respectively.
2. Future Outperformance Forecast: JPMorgan expects this trend of outperformance to continue, driven by factors such as book value compounding, dividends, and share buybacks.
3. Projected Annual Returns: The firm forecasts annual returns of 12% for HSBC and 15% for Standard Chartered, indicating strong growth potential.
4. Stable Interest Rate Outlook: A stable interest rate environment has bolstered investor confidence in the sustainability of the return on tangible equity (ROTE) for both banks.
5. ROTE Expansion: JPMorgan predicts that the normalized ROTE for HSBC and Standard Chartered will expand by 48 and 32 basis points, respectively, from 2025 to 2027.
6. Re-rating Potential: The broker sees further potential for re-rating of both banks, with upcoming 4Q25 results expected to act as a short-term catalyst.
7. Target Price Increases: JPMorgan has raised the target prices for both banks, reflecting their positive outlook and growth expectations.
8. Preference for Standard Chartered: Due to higher potential growth and re-rating prospects, JPMorgan has expressed a preference for Standard Chartered over HSBC.
Overall, the combination of strong recent performance, favorable market conditions, and positive growth forecasts underpins the Overweight rating for both banks.
